New Policy Document on Investment-linked Business for Insurers and Takaful Operators
15 January 2019
On 14 January 2019, Bank Negara Malaysia issued a
Policy Document on Investment-linked Business.
The Policy Document applies to licensed insurers and licensed takaful operators which carry on investment-linked business, i.e. where part of the premium or contribution made by a consumer on an insurance policy or a takaful certificate is invested in investment-linked funds offered by the licensed person.
The objectives of the Policy Document are to-
- Promote and maintain high corporate governance and professionalism in the administration of investment-linked business;
- Ensure professional and proper conduct in the sales and marketing of investment-linked policies/takaful certificates;
- Enhance product transparency and disclosure to protect the interests of policy owners/takaful participants.
To achieve the aforesaid objectives, the Policy Document sets out requirements on-
- Approval to carry on investment-linked business;
- The management of investment-linked funds;
- Product design;
- Disclosure;
- Investment; and
- Valuation of assets and liabilities of investment-linked funds.
The Policy Document also includes-
- The requirement to implement minimum allocation rates (Paragraph 15 of the Policy Document);
- The introduction of standards for sustainability tests to ensure proper management of long term persistency of investment-linked policies/takaful certificates (Paragraph 16 of the Policy Document); and
- Enhancements to product illustration format (Appendices IV, IV(a) and IV(b).
The Policy Document is deemed to have come into effect on 11 January 2019 except for-
- The requirements on minimum allocation rates, which will be effective for licensed insurers from 1 July 2019 and licensed takaful operators from 1 July 2020;
- The requirements on management of sustainability cover and the new requirements on product illustration, which will be effective for licensed insurers and licensed takaful operators from 1 January 2020.
The documents stated in paragraph 7.1 of the Policy Document will be superseded from the dates set out in that paragraph.